Let Crest Appraisal Services help you learn if you can get rid of your PMI
A 20% down payment is typically accepted when getting a mortgage. The lender's risk is usually only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and regular value variations in the event a borrower doesn't pay.
Lenders were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the market price of the house is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender consumes all the deficits, PMI is favorable for the lender because they acquire the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Acute homeowners can get off the hook sooner than expected. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take countless years to arrive at the point where the principal is only 20% of the original loan amount, so it's important to know how your home has grown in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends indicate declining home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have acquired equity before things cooled off.
The difficult thing for most homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to recognize the market dynamics of their area. At Crest Appraisal Services, we know when property values have risen or declined. We're experts at determining value trends in Seattle, King County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little trouble. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: